Move to curb growth of black money by ensuring reporting of all realty transactions whether under-construction or ready property

Lakhs of people who have booked under-construction apartments costing over.50 lakh have a big tax headache coming up their way. While making payments to builders,they will have to deduct 1% of the deal value as tax after June 1,and also go through the onerous task of depositing tax and filing returns.As many as 4.5-5 lakh homes are expected to be delivered in 2013,according to Property research firms Liases Foras and PropEquity as well as property consultancy CB Richard Ellis.The Finance Bill 2013 has proposed that purchaser of an immovable property (other than agricultural land) worth over.50 lakh is required to pay withholding tax at the rate of 1% from the consideration payable to a resident transferor.The guiding philosophy of this idea was to ensure property deals are reported,and it was believed that the rule will apply to ready property acquired.But officials say the finance bill does not make a distinction between under-construction and ready property.Tax will have to be cut from the total consideration and not balance payment made after the enforcement of the finance act, said an income tax department official.According to rules in respect of tax deducted at source,buyers would have to obtain a tax deduction and account number,or TAN,file a return with the tax authorities and also issue a TDS certificate to the seller.Once the tax is deducted,the builder would be able to claim credit for such TDS against its tax liability but the burden of this tax could fall on buyers if cash-starved builders refuse to take the liability on themselves.Tax experts say the onerous requirements should be diluted in the case of such buyers and the proposal needs to be clarified.An individual buyer will be obligated to comply with the withholding tax registration or TAN, tax payment,e-TDS returns,issue of TDS certificate to seller for claiming tax credit unless a simplified mechanism is provided in this direction, said Sunil Jain,partner,J Sagar Associates.Theres no clarity even in instances where the purchase is made from borrowed funds and where the property is in joint ownership.It looks at the provision of property of.50 lakh or more,assuming it is a transaction that happens at one go.A large number of transactions are installmentbased and extend over 3-5 years where installments are disbursed directly by banks, said Rahul Garg,leader,direct tax,PwC India.The provision would mean that the buyer would be responsible for the deduction of TDS each time an installment is disbursed by the bank unless the responsibility is shifted to the bank.Builders see the new TDS as a burden on buyers and have taken up the issue with the finance minister.